The Federal Labour Court (Bundesarbeitsgericht) ruled on 29 April 2021 (docket number: 8 AZR 267/20) that, in principle, the employer may claim reimbursement of required investigation costs from the employee. Subject to reimbursement are necessary costs incurred by the intervention of a specialized law firm if the employer has commissioned it to conduct investigations into the employee based on a concrete suspicion of significant misconduct. The employer must substantiate the necessity of the costs in each case by showing that the costs are based on a reasonable suspicion which has been confirmed. In the specific case, the Federal Labour Court rejected the employer’s claim for damages for investigation costs of a law firm because the necessity of the investigative measures against the employee were not sufficiently substantiated and proven in court.
Even though the Federal Labour Court sets high standards for the reimbursement of investigation costs caused by the employee’s misconduct, it also gives practical advice for such a claim. Consequently, with appropriate preparation, reimbursement may well be possible in individual cases in the future.
Whistle-blowers provided information about a potential severe misconduct of the plaintiff. Due to this specific suspicion, the employer decided to initiate an investigation, conducted by an external law firm. The investigations revealed that the employee had committed various breaches of duty to the detriment of the employer with financial damages in the six-figure range. In his function as purchasing manager, the plaintiff allowed himself to be invited by business partners to Champions League matches and also made several trips without official cause which he charged to the employer. Following the initial investigations, the plaintiff was given extraordinary termination without notice. After the plaintiff’s action for protection against dismissal was rejected by a final court decision, the employer demanded compensation for the costs of the law firm that had investigated the employee’s alleged breaches of duty. The Labour Court dismissed the counterclaim for damages, the second instance upheld it to the extent of EUR 66,500.
The Federal Labour Court ruled that an employer’s claim for damages generally extends to the costs incurred as a result of the intervention of a specialized law firm if the following conditions are fulfilled:
- the law firm was commissioned to investigate the employee on the occasion of a concrete suspicion of significant misconduct on the part of the employee, and
- the employee was convicted by the investigation of a serious intentional breach of contractual duty or a tortious act, and
- the nature and extent of the investigative measures were necessary for a reasonable, economically-minded employer under the circumstances of the individual case.
Because of his intentional behaviour the employee could not refer to the provision which regulates that in the first instance of the labour court proceedings each party has to bear its own lawyer’s fees (section 12a Labour Court Act [Arbeitsgerichtsgesetz]). The Court stated that in such a case the application of this provision was inappropriate.
In addition, the Court specified that not only internal investigations are necessarily required. Such investigations can also be carried out by external consultants, for example if there are not enough capacities or not enough trained employees within the company itself.
The court’s requirements for proving the necessity of the investigative measures are highly relevant in practice. On the one hand, the time spent, and the measures taken, must be clearly specified with regard to each alleged conduct. In addition, the recoverable costs of fact-finding must be distinguished from legal advice.
Good preparation and documentation during the investigation are essential for successful reimbursement. What is required is an exact documentation of the investigative measures according to type and scope, for example in a table. Each investigative step should be recorded with the associated suspicion, the time spent for investigations and the result. In addition, it should be shown whether any results of the investigation have given rise to further investigations.